I’m creating this post to help sellers and the public understand the Amazon financial statements and, specifically, the magnitude of anticompetitive pricing (predatory pricing) that has become an essential component of Amazon’s business strategy.
Fantastic analysis, Nick! We're a long time (since 2010) 3P Amazon seller that moved 2m units on the platform in 2020. I've never regretted my past success so much as this year, where I find myself with a pile of inventory and overhead, and a never-ending avalanche of Amazon fees and pay-to-play ad schemes that has eroded our margins to the point of insolvency. We are hanging on for dear life, but it's terrifying. I've been baffled by their seeming eagerness to kill off the golden gooses of 3P sellers (simultaneously jacking fees sky-high while enforcing price-parity, and hoping no one drops the hammer), but your article puts it in a new light - they are topline growth addicts, and they can't help it. It's going to be a bumpy ride, I sincerely appreciate you bringing your expertise to this issue.
Why is Amazon so fixated on their share price? I understand that the c-suite execs make their living from rising share price but is there another reason as well? I guess its as much about predatory pricing and keeping market share as it is growing market share but am I missing anything?
If Amazon isn't a monopoly and market-abuser these words have no meaning.
In the early days, share price is what propped up the company when they needed more capital. I recall reading articles from 2001/2002 where Wall Street was justifying Amazon's valuation based on revenue growth rate. I think this was ingrained in Bezos before he started the company being he came from Wall Street. It's been the culture every since. For Amazon's whole existence, everything has been about market domination and revenue growth at any cost. My next post will explain why FBA alone is the second most profitable corporation in the world, using the same financials used in this post. It's the predatory pricing via first party sales that resulted in them losing money last year.
Follow-up question: I've viewed the California AG's suit regarding price parity as the best near-term hope of someone putting a pin in Amazon's fee inflation (i.e. if overnight, other marketplaces are 10% cheaper, Amazon would theoretically have to react to that). I've struggled to understand the procedure and timelines on this. I realize this is likely another article, but what's your early prognosis on that, and would this likely be a years-long case even if California wins?
I haven't read the case, but I read a few summaries and looked up the statute it falls under - the Cartwright Act. In March, CA won an attempt by Amazon to have the case dismissed via summary judgment. That's an initial filing in virtually every case as it preserves some issues for appeal and is, every once in a while, successful. It's not abnormal for an antitrust case to take 10-15 years to resolve. There are millions of pages of evidence, lots of depositions, etc. Lawyers and courts have never-ending scheduling conflicts. I'd be surprised if CA gets it to trial in under five years.
Fantastic analysis, Nick! We're a long time (since 2010) 3P Amazon seller that moved 2m units on the platform in 2020. I've never regretted my past success so much as this year, where I find myself with a pile of inventory and overhead, and a never-ending avalanche of Amazon fees and pay-to-play ad schemes that has eroded our margins to the point of insolvency. We are hanging on for dear life, but it's terrifying. I've been baffled by their seeming eagerness to kill off the golden gooses of 3P sellers (simultaneously jacking fees sky-high while enforcing price-parity, and hoping no one drops the hammer), but your article puts it in a new light - they are topline growth addicts, and they can't help it. It's going to be a bumpy ride, I sincerely appreciate you bringing your expertise to this issue.
Great piece.
Why is Amazon so fixated on their share price? I understand that the c-suite execs make their living from rising share price but is there another reason as well? I guess its as much about predatory pricing and keeping market share as it is growing market share but am I missing anything?
If Amazon isn't a monopoly and market-abuser these words have no meaning.
In the early days, share price is what propped up the company when they needed more capital. I recall reading articles from 2001/2002 where Wall Street was justifying Amazon's valuation based on revenue growth rate. I think this was ingrained in Bezos before he started the company being he came from Wall Street. It's been the culture every since. For Amazon's whole existence, everything has been about market domination and revenue growth at any cost. My next post will explain why FBA alone is the second most profitable corporation in the world, using the same financials used in this post. It's the predatory pricing via first party sales that resulted in them losing money last year.
Follow-up question: I've viewed the California AG's suit regarding price parity as the best near-term hope of someone putting a pin in Amazon's fee inflation (i.e. if overnight, other marketplaces are 10% cheaper, Amazon would theoretically have to react to that). I've struggled to understand the procedure and timelines on this. I realize this is likely another article, but what's your early prognosis on that, and would this likely be a years-long case even if California wins?
I haven't read the case, but I read a few summaries and looked up the statute it falls under - the Cartwright Act. In March, CA won an attempt by Amazon to have the case dismissed via summary judgment. That's an initial filing in virtually every case as it preserves some issues for appeal and is, every once in a while, successful. It's not abnormal for an antitrust case to take 10-15 years to resolve. There are millions of pages of evidence, lots of depositions, etc. Lawyers and courts have never-ending scheduling conflicts. I'd be surprised if CA gets it to trial in under five years.
Oh wow. Well, I won't count on that relieving the pain any time soon, then! Thanks for explaining.